Sunday, January 20, 2008

Silver is affordable and sometimes fashionable:Silver being less expensive than gold, sounds like a more feasible option to use instead of white gold. It values not only lesser in dollars per ounce but is also lighter in weight (mass) and hence lesser quantity will be used to create the same piece when compared to gold. (A 10 gm gold bangle will look bigger when made in 10 gms of silver). Usually in the jewelry market we use sterling silver (925 parts silver in every 1000 parts of an alloy) for all purposes of strength and durability. Modern brands such as Scott Kay, David Yurman, Roberto Coin and many more use Silver as the base metal for fine jewelry. Silver makes a piece of jewelry more affordable for a larger crowd and hence more acceptable than many other metals. The wastage in silver jewelry manufacture is not as expensive as in white gold and hence the overhead charges are in control. So at the end of the day it is either the expense or it is the statement that drives us to buy silver.

Few style and techniques such as oxidization and burnishing can only happen in silver for e.g. in Mokume Gane, the Japanese technique of Metal smithing, without the presence of silver, etching cannot happen. Similarly, in Kundan jewelry, the Indian antique jewelry style with prominent use of uncut diamond, silver is an essential metal to bring out the shine in the diamond.

Most of all, silver is originally white and whereas white gold is technically pale yellow in color and needs a coting of rhodium to enhance the white color.

But white Gold is better for fine jewelry:However, cost sometimes can truly buy quality. In this case, durability at least!!! Silver tarnishes fairly easily when exposed to the atmosphere due to reaction with sulfur present in minute traces in the air. The temporary brownish tint caused by this reaction can be removed by cleaning with regular silver polish available in the market, however it is a repetitive activity. Also such frequent cleaning of the delicate product may render the stones loose from their setting. Silver is also a known material to cause allergy whereas Gold is a fairly well known hypoallergic metal in higher grade of alloy. Silver is a softer metal than gold thus the prongs built in silver to hold the precious stones as well as the links can easily get damaged. Silver gets scratched easily as well.

But for those who want the benefit of wearing jewelry crafted beautifully in good looking stones without living with the burden of the extreme expense accompanied, silver is a beautiful metal!!!

Saturday, January 19, 2008

The customer jewelry buying behavior during recession can be divided in two parts:

The initial bang where everyone takes a hit and essential purchase is the only thing that happens

And the follow up, when people try to recover and there is hope and struggle, a mood that sets the purchase in every field

Let us begin with the first part of Jewelry Buying behavior during RecessionWe are at a point where we know what sells is what is essential... Engagement rings and wedding bands. The next product category that will sell are earrings and pendants. And finally the rest of the categories in this luxury market, bracelets, necklaces, watches and the rest are going to be a much tougher sell than usual.

Competition has never been tougher, so what is it in a product that will sell and what will take a step back?

Let's Talk about the materials:Your customer for an engagement ring wants to pay less without a compromise in his expression of love because this is the most important piece of jewel that he is about to buy. To deliver to him what he desires, we must have a look at the most important ingredient in making an engagement ring: the material. The rock and the metal that holds this beauty.

The various options that you have, while choosing the metal for an engagement ring is usually gold or platinum. Despite the fluctuating prices of gold, it is still cheaper than Platinum which makes gold the obvious choice for the metal. 18K Gold will however compete with 14K and that is something that a store should look into as the personal choice of their clients.

A bigger diamond is usually considered better and therefore the compromise is made in the rest of the 4C's of a diamond. This is specially true during a recession. Customers will prefer size over color, clarity and cut. Help your clients make a decision by offering them better clarity and a bigger size with compensation in the lesser known Cut and Color. The key is to set the right balance of visual appeal and worth.

Give your customers a break and introduce them to the fascinating world of colored stones. Since an engagement ring is all about the rock, give them an option of other stones such as Topaz, Citrine, Quartz and other stones used for Engagement rings. Give diamond accents around the stone or else in a diamond ring, give accents by use of other color stones. Synthetics and treatments are coming in strong, but make sure your clients are well aware of the drawbacks of these options regarding the return policy and investment.

Lets now talk about the design:

Limit the metal: A Classic design such as a simple diamond held in a prong setting is most likely to sell faster than a more modern tension or even a bezel set diamond ring. The use of metal should be limited to what is required rather than being ornate. Comfort setting may not be a big seller for once. People are looking for what shows without having to pay the price of what does not. So get rid of that excess metal on the bottom of the shank and stay away from tension and flush settings.

Increase the visual size: Add in accents where ever possible to introduce the look of "bold" and splash in some color. Use shapes other than round brilliant for options because some of them look bigger and cost lesser while hiding the flaws better.

Do not miss out on the manufacturing details such as white prongs ALWAYS and back the diamond with white rhodium. Use accents of lower color grade than the main diamond to make it look apparently whiter. Do not allow the prongs to over lap the diamond but make them big enough to compliment the diamond and increase its visual size.

Raise the diamond to give it prominence. Lower the rest of the diamonds to highlight the center stone. The few things that you cannot compromise on are the strength of the prongs and the width of the ring in context with the design.

To make the sale:

If you have a discount to offer, then flaunt it and publicize it.

Know what your competition has to offer because his customer could be yours and vice versa. This is the only time when you will get new customers because customer loyalty will strictly be dictated by price and quality. So make sure that every window in your store and every ad you put across is as inviting as a warm Christmas cake because that is what your customer will look at in times as these.

Your priority at this point is to move your inventory in all segments, so make that your motto. Instead of simply reducing the direct cost of the ring, add in a bonus or discount for the next purchase. Or simply offer another product for the price of the discount you were about to offer.

Subtly remind your client of what they already own and make them feel good about it by offering jewelry cleaning and repair etc.

To reduce inventory costs be more creative with stocking up samples of that which will sell and can be easily modified to more complex designs. By this I mean that for every few similar looking designs, keep 1 ring complete with the setting etc to represent the several blanks ready to set the stone that your customer may choose. Keep the option of introducing other stones ready so as not to at least loose the customer.

Open up your online subscription to buying ready stones without raising the costs and yet maintaining the variety. Keep your catalogs ready and make yourself available on the world wide web. Internet is the most important tool you can put to use to promote yourself.

Brush up your sales staff, because the knowledge of product is the key factor to sales more now than ever before.

Friday, January 11, 2008

Tiffany & Co. just released its sales data for the month of November and December. Its US same store sales fell 2% according to the Wall Street Journal.

Tiffany's sales figures are a benchmark for luxury goods market. Jewelry represents the one of the highest elasticity (in microeconomic terms) products. This means that the demand for jewelry is highly sensitive to the price or willingness to pay. With a downturn expected, if willingness to pay decreases by 1% , the demand for jewelry lowers by a much greater percentage. The direct effect of reduced demand is in the sales numbers. Taking Tiffany's a high end jewelry brand moving into mass jewelry as an example we can fairly assume that the overall luxury product market should not be doing well either.

If a company chooses to cut costs, then laying off designers will certainly be item on the table. So, what kind of companies will be more prone to cutting costs. We believe that companies which sell low end jewelry and compete on cost are prone to slashing costs. Thus, if you work at one of this type of companies that you should be scared about your job.

If a company chooses to be more efficient by doing more with the same and in a better way, then it may not have to slash jobs after all. They may ask designers to be more thorough in their designs. They may ask product management to consider product lines more carefully... and the list goes on. A company that competes on quality of design has higher gross margins and is more likely to fall under this category.

Do yourself a favor? Estimate the gross margins of your firm and compare it with the Zales or Kay jewelers!!

Does the lowering of sales mean that companies will hire less jewelry designers? It could be true but let us dissect the issue analytically. Low demand usually means higher backlog of stale inventory which means higher discounts for consumers. More competition with the new collections. Lesser price quotes on the fresh products and hence reduction in profitability of the company.

Some companies react by cutting costs while others manage to be more efficient.

If a company chooses to cut costs, then laying off employees including designers will certainly be first thing on the table. So, what kind of companies will be more prone to cutting costs. We believe that companies which sell low end jewelry and compete on cost are prone to slashing costs. Thus, if you work at one of this type of companies that you should be scared about your job.

Do not forget... for a company like Tiffany there are only a couple of designers (labels) that work. The first few in the list to be chucked off are the out sourced manufacturers. The designers that work for those manufacturers would get lesser work (usually commission based) and hence lesser money. Usually all companies big and small have a few in-house and more outsourced/ freelance designers... they are usually the lesser affected people.

Independent designers are actually the ones who would really have to take the blow. Reason... safer jewelry buying habits will encourage the 'back to basics' kind of designs for which bigger players and direct manufacturers can provide better value/worth.

What will change however is the material and design... less comprehensive 'big diamond' look will be replaced by 'spread out color'. More bizarre forms and catchy patterns etc will happen over classic look. Expensive material will be replaced by simpler look alikes or wannabes materials. More variety will start so costume and imitation jewelry will be more into vogue than ever before. Synthetics may come in big but I highly doubt that considering it is still a big price as compared to lesser precious but real stones.

Combination of materials will definitely be in. More emphasis on other accessories will start taking over gradually and we will be back to earring-ring basics. Let us not forget the season as well though... that takes us to the more vivid color palatte and more variety of everyday jewelry. Designers do not get laid off under such circumstances rather their work only gets tougher and lesser money for them considering usually a percentage is paid for the design. Since lesser expensive jewelry comes in so volume of sales shoots up ... more designs required and hence more designers.

Thursday, January 10, 2008

One of the aspects that needs to be considered is the behavioral changes in a consumer when it comes to shopping for jewelry. Recession causes consumers to scale back on their discretionary spending. Jewelry is one of the first things that one would willingly live without.

There will always be the ever lasting engagement rings and other staples that will continue to sell. After all, in the burning fire of love and romance, what's a recession to come in the way of a proposal. Usually the savings begin months and sometimes even years before the actual proposal and purchase.

Due to recession, however, the prices and the demand for new engagement rings can be affected by the surrounding inventory in the store. The stores will in order to churn their inventory and move or rotate the dead stock give heavy discounts on the products. And so an average consumer may find it easier to shop for the lower prices.

In such an environment, it is tough to stand out. Thus, stores and designers who focus on creative and variety of designs with alternates to price ranges for engagement rings and other staple jewelry can increase their margins and keep customers attracted. We believe that the behavior of the customer alters when a customer feels that he/she can bargain for price.

Again, to hold the line on prices, the customer needs to be enticed with variety of designs. Some may argue what's so special about recession since it is always a nobrainer to keep a variety of designs. Well, during recession there is only so much inventory you can keep so a company has to be very selective in their products and designs. We are suggesting that it will be a good idea to stick to the staples like the engagement rings.

Aspirational shoppers will drool over every piece of fine jewelry standing at the window of Tiffay's at 5th Avenue. But, a large mortgage bill or unpaid credit card bills compounded by threats of job loss will definitely prevent the consumer from buying their aspiration. We believe that another type of product that might outsell its peer could be the ones made of less expensive stone but supreme design. This is to increase the affordability and maintain the sizzle of aspiration as much as possible.

Tuesday, January 01, 2008

So when Heidi Klum gets sued by Van Cleef and Arpels does it represent a terminal shift in the way the business of design is conducted? A $25,000 lawsuit doesn't seem much of an amount for Van Cleef and Arpels (though it may be big for a budding designer in Heidi) yet the repercussion of the lawsuit could be huge in the business of design. Is this really a precedent for industry wide litigation fest or is this just a minor show of strength between two designers?

Can design be patented or copyrighted? Really?Van Cleef and Arpels claims that Heidi Klum's design company copied the Van Cleef And Arpel's Alhambra jewelry. Alhambra jewelry is a derivative of Clover design pioneered by Coco Chanel and others. Whether Heidi Klum's company copied the designs is another matter but a bigger question is the protection offered to designers by law. Clearly, patents and copyright laws are not sufficient to protect designers. A patent can protect a chemical formula of a drug made by Pfizer but how can it enforce the copying of designs. Designs are conceived from inspiration and can inspiration be copyright protected? It is the derivation of these inspirations that manifest in the designs that we have to love. There appears to be a very narrow band within which copyright and patent laws offer protection to designers.

Lost Revenues or Lost Identity?Another difficulty is the assessment of reparations for lost sales over copying of designs. On what basis can a company claim a specific amount as compensation for copying? Van Cleef and Arpels may well have pulled out the $25,000 amount on the ability to pay rather than actual losses they may have suffered. Jewelry Designs are forms of art rather are very difficult to value. Companies can year over year sales and can come up with a number but it is really all that a company lost?

We at design depot believe that copied design result in a loss of identity which is a far significant loss than any lost revenue. Directly copied designs are a blow below the belt that breaks the unwritten code of honor among designers. It may serve as a business strategy to make quick profits but it can never result in a sustained competitive advantage and a lasting brand image.

Brand image and jewelry designs are inexplicably linked. Every jewelry brand have their signature collections. These collections may morph over time but they represent the true identity of the brand. This identity does not depend on the designer but the brand and its brand managers. For example, Van Cleef and Arpels designs are inspired by nature and fantasy. Is it possible that Van Cleef Arpels is signaling to all the inspiring designers that they will fight tooth and nail and not take any competition lightly?